This is part two of Both Ends of the Table, our series for the people sitting at the head of the family table: receiving from a parent at one end while planning what they pass to their own children at the other. Last time we talked about preparing the next generation. Today we look the other direction, up the table, at an inheritance you already know is on its way.
Most people are blindsided by an inheritance. It arrives in the middle of grief, all at once, with no time to plan. But a smaller group is in a rare and valuable position: they can see it coming. A parent's estate is settling, or a parent has been open about their plans, and there is a window between knowing and receiving. From the conversations our advisors have, that window is the single most wasted opportunity in all of inheritance planning, because almost nobody uses it.
How do I prepare for an inheritance that is coming?
Use the window. The key thing to understand is that some of the most important decisions about an inheritance cannot be made after it arrives, only before. Once you know something is coming, the smart moves are to learn what kind of assets are actually involved, understand which clocks will start the day the person passes, and coordinate it all with the plan you already have, well before the money lands. Preparation done in advance is worth far more than scrambling afterward.
The window is the whole opportunity
Here is why timing matters so much. After an inheritance lands, a lot of it is locked in. You cannot undo how an account transferred or reset a clock that already started. But in the window before, you can get your own house in order, understand what is coming, and have the conversations that make everything smoother later. The families who handle inheritances well are almost never the ones who reacted gracefully. They are the ones who prepared quietly in advance.
Know what is actually coming
An inheritance is not one thing, and the differences matter enormously. Cash and a paid-off home behave very differently from a retirement account. If part of what is coming is a retirement account, there is a clock attached: most non-spouse heirs must empty an inherited IRA or 401(k) within ten years. With a traditional account, every dollar that comes out is taxable income to you. An inherited Roth follows the same ten-year clock, but its withdrawals are generally tax-free, which is a meaningful difference if you are inheriting both kinds. A house or other appreciated property, on the other hand, usually gets a stepped-up basis, meaning its value resets to the date of death and a sale near that time can owe little or no capital gains tax. You do not need exact figures to prepare. You just need to know, roughly, which of these buckets the inheritance falls into, because each one calls for a completely different plan.
Layer it onto your plan, do not just bolt it on
This is the part that is specific to families who are already comfortable. When you already have a solid nest egg, a few million dollars arriving on top of it is not just a happy addition. It interacts with everything. It can lift your own estate toward the federal exemption, currently 15 million dollars per person and 30 million per couple for 2026 under current law. A large inherited IRA, withdrawn on top of your existing income, can stack onto your tax bracket and even raise your future Medicare premiums through the IRMAA surcharge. None of that is a reason to dread an inheritance. It is a reason to plan the receiving end and your own plan as one connected picture, rather than treating the windfall as a separate event.
If you are named the executor, your job starts early
If a parent has asked you to be the executor or trustee, you are not just a future beneficiary, you are about to have a job. The most helpful thing you can do now is simple: know where the documents live, know who the parent's attorney and advisor are, and understand the broad strokes of the plan while you can still ask questions. Executors who walk in cold, after the fact, spend months reconstructing what one conversation could have answered.
The conversation that makes it all possible
All of this depends on something we covered earlier in this series: actually talking about it. You cannot prepare for what you refuse to discuss. You do not need a parent to hand over a balance sheet. You need enough of a conversation to know the shape of what is coming and where to look. Approached with care, from a place of wanting to honor their wishes rather than count the money, most parents are relieved to have it.
Both ends of the table
This is the heart of the series. If you are fortunate enough to see an inheritance coming, you are sitting at both ends of the table at once: a legacy arriving from your parents on one side, your own children waiting on the other. The instinct is to handle the inheritance now and think about your own plan later. The families who do this best refuse to separate them. What you receive, how it is taxed, what you keep, and what you eventually pass on are one continuous story. Plan it that way.
How do I prepare for an inheritance?
Use the time before it arrives. Learn what kinds of assets are involved, understand that an inherited retirement account carries a ten-year withdrawal clock while inherited property usually gets a stepped-up basis, coordinate the inheritance with your own existing plan, and if you are the executor, learn where documents are and who to call while you can still ask.
Is money you inherit taxable?
In most cases, simply inheriting cash or property is not taxable income to you on your federal return. The main exceptions are withdrawals from an inherited traditional retirement account, which are taxable, and growth on assets after you inherit them. A few states have their own inheritance tax, so it is worth checking yours.
When does the clock on an inherited IRA start?
The ten-year window for most non-spouse beneficiaries begins at the original owner's death, which is one reason it helps to understand a retirement account is part of your inheritance before it arrives rather than after.
The reason to do any of this early is that an inheritance you can see coming is a gift of time, and time is the one thing you cannot buy back afterward. When you are ready, the calmest path is to sit down with someone who can look at both ends of the table at once: what is coming, how it fits your existing plan, and what it means for the next generation. That is what our team does in an Inheritance Planning meeting, and our BeneficiaryBox keeps the whole picture organized in one place. If you know an inheritance is on the horizon and want to use the window well, you can reach our team at American Retirement Advisors at 602-281-3898.
Next in Both Ends of the Table: why, once there is real money in motion, the problem is rarely growth. It is coordination.
Disclaimer: The information in this article is for educational purposes only and does not constitute tax, legal, or investment advice. Tax laws change frequently, and individual circumstances vary. American Retirement Advisors does not provide tax or legal services. Before making any tax-related decisions, consult a qualified CPA, tax attorney, or financial planner who can evaluate your specific situation.